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Should You Really Consolidate Student Loans?

If you’re pondering whether or not to consolidate student loans, consider this; all college loans have unique attributes, and not all may be perfectly suited for student loan consolidation. Student loan consolidation is, in most cases, an outstanding option for reducing monthly payments, locking in low rates, and earning opportunities to shave money off your loan balance with lender incentives. When you consolidate student loans, you lock in the current interest rate by allowing the lender to repay the entire amount, then repaying the lender free from government interest rate fluctuations.

PLUS Loan – Good Choice for Student Loan Consolidation 폰테크

Like many college loans, the PLUS loan (Parent Loan for Undergraduate Students) is a type of federal loan with a variable interest rate. This means that the monthly payment will change when the government reconfigures the interest rates annually (July 1).

The interest rates on PLUS loans are generally higher than other types of college loans so when interest rates increase, PLUS loans can be greatly affected. Since college loans are consolidated by social security number, parents should apply separately for PLUS loan consolidation.

Perkins Loan – Consider before refinancing

The Perkins loan is a fixed rate loan and has some unique benefits that can be lost with a student loan consolidation. The Perkins loan has a forgiveness program that will waive all or part of the repayment amount if the borrower works in specific occupations that provide a valuable service to the community. Some such eligible occupations are teachers in low income areas, nurses, and medical technicians.

If you’re not eligible for the various loan forgiveness opportunities offered by the Perkins loan, there is still another point to consider. Because the Perkins loan is a fixed rate loan, and because the interest rate on a student loan consolidation is determined by the weighted average of the other loans, you could actually pay a small percentage more on a consolidated Perkins loan over time.

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